Indonesia’s energy transition needs a decentralised approach - East Asia Forum
Published February 04, 2026
Indonesia’s Energy Transition Requires a Decentralized Strategy
As Indonesia navigates its energy transition, the need for a decentralized approach has become increasingly evident. This strategy is essential for the country to effectively manage its diverse energy resources, enhance energy access, and achieve its climate goals. The current centralized energy system, primarily reliant on fossil fuels, faces significant challenges that a decentralized model could address.
Indonesia, as the largest archipelago in the world, comprises over 17,000 islands, which presents unique challenges for energy distribution and infrastructure development. The traditional centralized energy system has struggled to provide consistent and reliable electricity to all regions, particularly in remote and rural areas. As of 2021, approximately 11% of the population still lacked access to electricity, with the majority of these individuals residing in rural areas. This situation underscores the urgent need for a more inclusive energy strategy that can cater to the diverse needs of the population.
The Current Energy Landscape
Indonesia's energy landscape is characterized by a heavy reliance on fossil fuels, particularly coal and natural gas. In 2020, fossil fuels accounted for approximately 85% of the country’s total primary energy supply. The government has set ambitious targets to increase the share of renewable energy in the national energy mix to 23% by 2025 and 31% by 2050. However, achieving these targets will require significant changes to the current energy system.
The centralized approach has led to inefficiencies and inequities in energy distribution. Large-scale power plants are often located far from the communities they serve, resulting in transmission losses and increased costs. Additionally, the reliance on centralized power generation limits the ability of local communities to participate in energy production, which can stifle innovation and the adoption of renewable technologies.
Benefits of a Decentralized Energy System
A decentralized energy system offers several advantages that can help Indonesia overcome its current energy challenges. First and foremost, it can enhance energy access for remote and underserved communities. By deploying small-scale renewable energy systems, such as solar panels, wind turbines, and biomass generators, local communities can generate their own electricity, reducing their dependence on centralized power sources.
Furthermore, a decentralized approach can promote energy resilience and security. Local energy production can mitigate the impact of natural disasters or disruptions in the centralized grid, ensuring that communities have access to power even during emergencies. This resilience is particularly important for Indonesia, which is prone to natural disasters such as earthquakes and volcanic eruptions.
Decentralization can also drive economic development by creating local jobs and fostering innovation. By investing in renewable energy technologies and infrastructure, communities can stimulate local economies and attract investment. This economic diversification is crucial for Indonesia, which is seeking to reduce its reliance on fossil fuels and transition to a more sustainable energy future.
Policy Recommendations for Decentralization
To facilitate a successful transition to a decentralized energy system, Indonesia must implement supportive policies and regulatory frameworks. One key recommendation is to establish clear guidelines for the integration of renewable energy sources into the national grid. This includes simplifying the permitting process for renewable energy projects and providing incentives for local communities to invest in small-scale energy systems.
Additionally, the government should promote public-private partnerships to leverage private sector investment in renewable energy. By collaborating with private companies, local governments can access the necessary resources and expertise to develop decentralized energy projects. These partnerships can also help to scale up successful pilot projects and replicate them in other regions.
Furthermore, enhancing capacity building and technical training programs is essential to ensure that local communities have the skills needed to manage and maintain decentralized energy systems. This can empower communities to take ownership of their energy resources and foster a culture of sustainability.
Community Engagement and Participation
Community engagement is a critical component of a successful decentralized energy transition. Local stakeholders, including residents, businesses, and local governments, must be involved in the planning and implementation of renewable energy projects. This participatory approach can help to identify the specific energy needs of communities and ensure that projects are tailored to local contexts.
Moreover, raising awareness about the benefits of renewable energy and decentralized systems can encourage community buy-in and participation. Educational campaigns can inform residents about the potential cost savings, environmental benefits, and energy independence associated with local energy production.
International Cooperation and Support
Indonesia’s energy transition can also benefit from international cooperation and support. Collaborating with other countries and international organizations can provide access to technical expertise, funding, and best practices for implementing decentralized energy systems. For instance, partnerships with countries that have successfully developed decentralized energy models can offer valuable insights and lessons learned.
Additionally, international financial institutions can play a crucial role in providing funding for renewable energy projects. By offering low-interest loans and grants, these institutions can help reduce the financial burden on local communities and encourage investment in sustainable energy solutions.
Conclusion
In conclusion, Indonesia’s energy transition necessitates a shift toward a decentralized approach that prioritizes local energy production and community engagement. By embracing this model, the country can enhance energy access, promote resilience, and drive economic development. To achieve these goals, it is essential for the government to implement supportive policies, foster public-private partnerships, and engage local communities in the energy transition process. With the right strategies in place, Indonesia can successfully navigate its energy transition and pave the way for a sustainable and inclusive energy future.
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